IB Business Management SLTopic 2 — Organisational StructurePaper 1 & 2Core skill~10 min read
Reading Different Organisation Charts
Charts turn up in exams as stimulus material, and the marks come from reading them properly: how many levels, how wide the spans, and what the business has chosen to group people by. There are two shapes to know and three ways of grouping.
📘 What you need to know
Tall structures have many levels, narrow spans, a long chain of command and more centralised decisions.
Flat structures have few levels, wide spans, a short chain of command and more autonomy for staff.
Firms group people by function, by product or project, or by region.
By function is the most common: finance, marketing, operations, human resources.
By product builds teams around a product line, often as a matrix.
By region suits firms operating in several countries, letting each area respond to local needs.
Tall and flat
These are the same organisation drawn two ways. The tall one has more managers between the top and the bottom; the flat one has fewer.
Government departments and universities tend to be tall. Start-ups are almost always flat, partly by choice and partly because they cannot afford middle managers.
Tall structure
Flat structure
Clear hierarchy of authority with well-defined roles and responsibilities
A culture of collaboration and open communication
Encourages specialisation and expertise within each department
Decisions are made faster because fewer people have to approve them
Plenty of promotion steps, which motivates people who want to climb
Encourages creativity, since staff have more autonomy and flexibility
Communication barriers open up between the top and the bottom
Roles can become ambiguous with no clear hierarchy to fall back on
Decisions are slow, because information passes through many layers
Few obvious opportunities for promotion
Risk of bureaucracy and too many management levels to pay for
Staff take on several roles at once, which can lead to burnout
Organisation by function
The most common structure of all. Employees are grouped by what they do — finance in one department, marketing in another — so that people with the same expertise, qualifications and experience work together.
The danger with functional structures is silos: each department pursues its own objectives and loses sight of what the business as a whole is trying to do.
Organisation by product
Here the business builds a team around each product or project. A large food company might give a single well-known chocolate bar its own dedicated team, drawing people from finance, marketing and operations to work on that product alone. When employees answer both to a functional manager and to a product manager, the result is a matrix structure — covered in detail on the next page.
Organisation by region
Firms operating in several countries often split by geography instead. Each region gets its own management, so it can respond to local customers, local laws and local expectations rather than waiting for head office to understand them.
Notice that Europe has split by product while the other regions have not. Regional structures allow that, and a purely functional structure does not.
The three groupings are not rivals fighting for one crown. Large firms combine them: regional divisions, each with functional departments, and project teams cutting across both.
Worked examples
WORKED EXAMPLE
Distinguish between a tall and a flat organisational structure. [4]
Define bothA tall structure has many levels of management, narrow spans of control and a long chain of command.A flat structure has few levels, wide spans and a short chain of command.State the consequence, not just the shape
Tall structures tend to be more centralised and slower to decide; flat ones give staff more autonomy and react faster.
4 marks
WORKED EXAMPLE
A chart shows one director, four managers and 24 shop-floor staff shared equally between them. State the levels of hierarchy and calculate the average span of control of the managers. [3]
Step 1: count the levelsDirector, managers, shop-floor staff = 3 levels of hierarchyStep 2: divideSpan of control = 24 ÷ 4Average span of control = 6The director’s own span is 4. Read carefully whose span the question is asking about.
WORKED EXAMPLE
A clothing firm selling in Europe, Asia and South America is choosing between a functional and a regional structure. Recommend one. [10]
The case for functionalSpecialists sit together, so expertise is deep and duplication is avoided. One marketing team, one finance team, lower costs.
The case for regionalTastes, laws and seasons differ sharply between the three markets, and a regional structure lets each area respond without waiting for head office. It also copes better with cultural differences.
The cost of regional
Three marketing teams instead of one is duplication, which is a diseconomy of scale.
JudgementRegional divisions, with brand and design kept centralClothing is highly local in taste and season, so responsiveness matters more than the duplication costs. This would flip if the firm sold one standard product worldwide.
💡 Exam tip
Read the chart before you write. Levels, spans and groupings are usually visible in ten seconds and often carry marks.
Never say tall is bad. It suits large, complex organisations that need control and clear promotion paths.
Name the grouping — by function, product or region — rather than just describing the boxes.
Use silos as the standard criticism of functional structures, and duplication as the criticism of regional ones.
Link back to communication and motivation. Structure decides how fast information moves and how much autonomy people have.
⚠ Common mix-up
Tall does not mean big. A large firm can be flat, and a small one can be surprisingly tall.
Levels of hierarchy are not the same as number of employees. Count the rows, not the boxes.
Flat structures are not free of hierarchy. There is still a boss, just fewer layers.
By product is not the same as by function. One groups around what is sold, the other around what people do.
Delayering is not automatically an improvement. Removing managers widens spans, and someone still has to do the supervising.
Up next: Flexible and Project-Based Structures — matrix working, and how firms redesign themselves when the world outside stops sitting still.
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